If You Own a BUSINESS AND AN IRA, The IRS Has Two Separate Traps at Retirement The Dual Exit Trap

Paul is 61. He owns a regional HVAC company he built from scratch over 28 years. He has a buyer — a PE-backed roll-up offering $3,800,000 for the assets. He also has a SEP IRA with $890,000 built through maximum contributions since 2003. His business broker sent a summary sheet showing approximately $2,840,000 net after commissions and estimated taxes. Paul called his wife. He said they were set. The broker's sheet models one exit. Paul has two. And the two exits do not operate independently. They interact. And the interaction is what the corner booth conversation never addressed. In this video, we dissect the dual exit trap — what happens when a business sale income event and an IRA distribution strategy share the same tax return. The business sale generates $380,000 of ordinary income from equipment depreciation recapture taxed at Paul's highest available bracket, and $3,040,000 of capital gain triggering the 20% federal rate plus the 3.8% Net Investment Income Tax. The SEP IRA, left undisturbed in the sale year, sits at $890,000 growing toward RMDs that will stack against the investment income from the reinvested sale proceeds in every retirement year going forward — pushing the combined MAGI toward IRMAA thresholds and the provisional income cascade simultaneously. We cover all five structural decisions that determine whether Paul pays maximum or optimal tax on both exits. The pre-sale Roth conversion window where the IRA converts at 32% instead of 37%. The Section 1202 qualified small business stock exclusion that requires C corporation structure years before the sale. The installment sale that spreads $3,040,000 of capital gain across five years below the 20% rate threshold. The Qualified Opportunity Zone deferral for the capital gain portion. And the post-sale Roth conversion ladder coordinated with the investment income from the reinvested sale proceeds. State-by-state breakdown across Tennessee, California, Texas, and Florida — including the domicile change calculation for California business owners where the state tax differential on a $3,800,000 sale exceeds $335,000. The business exit and the IRA exit need to be planned in the same room. This is not financial advice. This is what happens when they are planned separately. Subscribe. Drop your business value, IRA balance, and state in the comments.